Fed's Duke Backs Rental Option to Mitigate Home Foreclosures, Unemployment
U.S. Federal Reserve Governor Elizabeth Duke
Andrew Harrer/Bloomberg
Elizabeth Duke, governor of the U.S. Federal Reserve.
Elizabeth Duke, governor of the U.S. Federal Reserve. Photographer: Andrew Harrer/Bloomberg
Federal Reserve Governor Elizabeth Duke said officials should stabilize communities wracked by the housing crisis by promoting the rental of homes owned by financial institutions after undergoing foreclosure.
“It is not sufficient, given current economic conditions and the significant needs of our neighborhoods, to do things the way we have always done them,” Duke said today in a speech at a Fed conference in Washington. “Including rental options among the mix of stabilization strategies makes particular sense at a time of high unemployment.”
The percentage of U.S. mortgages with one overdue payment rose in the second quarter, the first gain in early delinquencies in more than a year, as economic growth slowed and jobless claims increased. Home loans overdue by a month climbed to 3.51 percent, from 3.45 percent in the first quarter, according to an Aug. 26 report from the Washington-based Mortgage Bankers Association.
“Redevelopment strategies” for neighborhoods with high foreclosure rates should include “lease-purchase and even converting owners to renters to avoid vacancies,” Duke said.
“What began as a problem rooted in poorly underwritten loans has been exacerbated by high unemployment and slow economic growth,” Duke said. “As delinquencies and foreclosures continue to grow, they will hinder the ability of communities to heal and ultimately to thrive.”
The inventory of homes in foreclosure fell to 4.57 percent from a record 4.63 percent, the first decline since 2006, as more loans were modified and a federal tax credit for homebuyers boosted short sales of homes in default. The percentage of loans late by two or more payments dropped in the second quarter, according to the MBA report.
To contact the reporter on this story: James Tyson in Washington at jtyson@bloomberg.net
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